Interactive Brokers Group Announces 3Q2021 Results
Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.43 for the quarter ended September 30, 2021 compared to $0.58 for the same period in 2020, and adjusted diluted earnings per share of $0.78 for this quarter compared to $0.53 for the year-ago quarter.
Net revenues were $464 million and income before income taxes was $234 million for this quarter, compared to net revenues of $548 million and income before income taxes of $334 million for the same period in 2020. Adjusted net revenues were $650 million and adjusted income before income taxes was $420 million for this quarter, compared to adjusted net revenues of $518 million and adjusted income before income taxes of $304 million for the same period in 2020.
Financial Highlights
Commission revenue increased $32 million, or 11%, from the year-ago quarter on higher customer stock and options trading volumes. Net interest income increased $79 million, or 41%, from the year-ago quarter on higher margin loan balances and strong securities lending activity. Other income decreased $199 million from the year-ago quarter. This decrease was mainly comprised of (1) $191 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which decreased to a $185 million mark-to-market loss this quarter from a $6 million mark-to-market gain in the same period in 2020; and (2) $30 million related to our currency diversification strategy, which lost $3 million this quarter compared to a gain of $27 million in the same period in 2020; partially offset by (3) the non-recurrence of a $13 million impairment loss on our investment in OneChicago Exchange recognized in the year-ago quarter. 50% pretax profit margin for this quarter, down from 61% in the year-ago quarter. 65% adjusted pretax profit margin for this quarter, up from 59% in the year-ago quarter. Total equity of $10.0 billion.The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 14, 2021 to shareholders of record as of December 1, 2021.
Business Highlights
Customer accounts increased 57% from the year-ago quarter to 1.54 million. Customer equity grew 52% from the year-ago quarter to $353.8 billion. Total DARTs2 increased 24% from the year-ago quarter to 2.26 million. Cleared DARTs increased 24% from the year-ago quarter to 2.02 million. Customer credits increased 22% from the year-ago quarter to $86.2 billion. Customer margin loans increased 67% from the year-ago quarter to $50.2 billion.Effects of Foreign Currency Diversification
In connection with our currency diversification strategy, we base our net worth in GLOBALs, a basket of 10 major currencies in which we hold our equity. In this quarter, our currency diversification strategy decreased our comprehensive earnings by $43 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.41%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $3 million) and (2) Other Comprehensive Income (loss of $40 million).
Conference Call Information:
Interactive Brokers Group, Inc. will hold a conference call with investors today, October 19, 2021, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the “Interactive Brokers Conference Call.” The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.
About Interactive Brokers Group, Inc.:
Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 135 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to clients worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its February 26, 2021, Best Online Broker Review.
Cautionary Note Regarding Forward-Looking Statements:
The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the Securities and Exchange Commission.
______________________
1 See the reconciliation of non-GAAP financial measures starting on page 9.
2 Daily average revenue trades (DARTs) are based on customer orders.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Nine Months Ended September 30, Ended September 30,2021
2020
2021
2020
(in millions, except share and per share data) Revenues: Commissions $311
$279
$1,030
$824
Other fees and services49
45
160
123
Other income (loss)(170)
29
68
25
Total non-interest income190
353
1,258
972
Interest income325
240
1,022
853
Interest expense(51)
(45)
(169)
(206)
Total net interest income274
195
853
647
Total net revenues464
548
2,111
1,619
Non-interest expenses: Execution, clearing and distribution fees61
74
183
227
Employee compensation and benefits98
77
291
239
Occupancy, depreciation and amortization19
17
58
51
Communications8
6
24
19
General and administrative44
37
138
206
Customer bad debt-
3
3
13
Total non-interest expenses230
214
697
755
Income before income taxes234
334
1,414
864
Income tax expense28
32
116
65
Net income206
302
1,298
799
Net income attributable to noncontrolling interests164
256
1,057
675
Net income available for common stockholders $42
$46
$241
$124
Earnings per share: Basic $0.44
$0.59
$2.60
$1.60
Diluted $0.43
$0.58
$2.58
$1.58
Weighted average common shares outstanding: Basic96,229,958
78,509,625
92,814,767
77,543,008
Diluted96,989,968
79,120,548
93,671,689
78,243,699
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Nine Months Ended September 30, Ended September 30,2021
2020
2021
2020
(in millions, except share and per share data) Comprehensive income: Net income available for common stockholders $42
$46
$241
$124
Other comprehensive income: Cumulative translation adjustment, before income taxes(9)
8
(21)
5
Income taxes related to items of other comprehensive income-
-
-
-
Other comprehensive income (loss), net of tax(9)
8
(21)
5
Comprehensive income available for common stockholders $33
$54
$220
$129
Comprehensive earnings per share: Basic $0.34
$0.69
$2.37
$1.67
Diluted $0.34
$0.69
$2.35
$1.65
Weighted average common shares outstanding: Basic96,229,958
78,509,625
92,814,767
77,543,008
Diluted96,989,968
79,120,548
93,671,689
78,243,699
Comprehensive income attributable to noncontrolling interests: Net income attributable to noncontrolling interests $164
$256
$1,057
$675
Other comprehensive income - cumulative translation adjustment(31)
37
(74)
24
Comprehensive income attributable to noncontrolling interests $133
$293
$983
$699
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
September 30,2021 December 31,
2020 (in millions) Assets Cash and cash equivalents $
2,838
$4,292
Cash - segregated for regulatory purposes23,125
15,903
Securities - segregated for regulatory purposes14,400
27,821
Securities borrowed3,811
4,956
Securities purchased under agreements to resell6,108
792
Financial instruments owned, at fair value659
630
Receivables from customers, net of allowance for credit losses50,503
39,333
Receivables from brokers, dealers and clearing organizations4,038
1,254
Other assets800
698
Total assets $106,282
$95,679
Liabilities and equity Liabilities Short-term borrowings $28
$118
Securities loaned10,535
9,838
Financial instruments sold but not yet purchased, at fair value233
153
Other payables: Customers84,087
75,882
Brokers, dealers and clearing organizations781
182
Other payables607
503
85,475
76,567
Total liabilities96,271
86,676
Equity Stockholders' equity2,331
1,951
Noncontrolling interests7,680
7,052
Total equity10,011
9,003
Total liabilities and equity $106,282
$95,679
September 30,2021 December 31,
2020 Ownership of IBG LLC Membership Interests
Interests
%
Interests
%
IBG, Inc.98,175,951
23.5%
90,780,444
21.8%
Noncontrolling interests (IBG Holdings LLC)319,880,492
76.5%
325,960,034
78.2%
Total IBG LLC membership interests418,056,443
100.0%
416,740,478
100.0%
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA
TRADE VOLUMES: (in 000's, except %) Cleared Non-Cleared Avg. Trades Customer % Customer % Principal % Total % per U.S. Period Trades Change Trades Change Trades Change Trades Change Trading Day2018
328,099
21,880
18,663
368,642
1,478
2019
302,289
(8%)
26,346
20%
17,136
(8%)
345,771
(6%)
1,380
2020
620,405
105%
56,834
116%
27,039
58%
704,278
104%
2,795
3Q2020
160,015
14,701
7,453
182,169
2,846
3Q2021
193,218
21%
18,106
23%
8,228
10%
219,552
21%
3,431
2Q2021
196,659
16,130
7,975
220,764
3,504
3Q2021
193,218
(2%)
18,106
12%
8,228
3%
219,552
(1%)
3,431
CONTRACT AND SHARE VOLUMES: (in 000's, except %) TOTAL Options % Futures1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change2018
408,406
151,762
210,257,186
2019
390,739
(4%)
128,770
(15%)
176,752,967
(16%)
2020
624,035
60%
167,078
30%
338,513,068
92%
3Q2020
163,972
39,186
87,514,614
3Q2021
214,988
31%
36,940
(6%)
172,828,874
97%
2Q2021
196,715
35,061
172,099,915
3Q2021
214,988
9%
36,940
5%
172,828,874
0%
ALL CUSTOMERS Options % Futures1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change2018
358,852
148,485
198,909,375
2019
349,287
(3%)
126,363
(15%)
167,826,490
(16%)
2020
584,195
67%
164,555
30%
331,263,604
97%
3Q2020
153,612
38,685
85,893,357
3Q2021
205,797
34%
36,473
(6%)
172,082,316
100%
2Q2021
189,073
34,635
171,417,373
3Q2021
205,797
9%
36,473
5%
172,082,316
0%
CLEARED CUSTOMERS Options % Futures1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change2018
313,795
146,806
194,012,882
2019
302,068
(4%)
125,225
(15%)
163,030,500
(16%)
2020
518,965
72%
163,101
30%
320,376,365
97%
3Q2020
137,660
38,405
83,246,086
3Q2021
186,656
36%
36,245
(6%)
169,002,045
103%
2Q2021
170,902
34,355
168,601,027
3Q2021
186,656
9%
36,245
6%
169,002,045
0%
1 Includes options on futuresINTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED
PRINCIPAL TRANSACTIONS Options % Futures1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change2018
49,554
3,277
11,347,811
2019
41,452
(16%)
2,407
(27%)
8,926,477
(21%)
2020
39,840
(4%)
2,523
5%
7,249,464
(19%)
3Q2020
10,360
501
1,621,257
3Q2021
9,191
(11%)
467
(7%)
746,558
(54%)
2Q2021
7,642
426
682,542
3Q2021
9,191
20%
467
10%
746,558
9%
1 Includes options on futures CUSTOMER STATISTICS Year over Year3Q2021
3Q2020
% Change Total Accounts (in thousands)1,536
981
57%
Customer Equity (in billions)1 $353.8
$232.7
52%
Cleared DARTs (in thousands)2,017
1,629
24%
Total Customer DARTs (in thousands)2,263
1,832
24%
Cleared Customers Commission per Cleared Commissionable Order2 $2.46
$2.69
(9%)
Cleared Avg. DARTs per Account (Annualized)343
442
(22%)
Consecutive Quarters3Q2021
2Q2021
% Change Total Accounts (in thousands)1,536
1,414
9%
Customer Equity (in billions)1 $353.8
$363.5
(3%)
Cleared DARTs (in thousands)2,017
2,082
(3%)
Total Customer DARTs (in thousands)2,263
2,304
(2%)
Cleared Customers Commission per Cleared Commissionable Order2 $2.46
$2.38
3%
Cleared Avg. DARTs per Account (Annualized)343
382
(10%)
1 Excludes non-customers. 2 Commissionable Order - a customer order that generates commissions.Three Months
Nine Months
Ended September 30,
Ended September 30,
2021
2020
2021
2020
(in millions) Average interest-earning assets Segregated cash and securities $37,239
$43,589
$41,212
$41,283
Customer margin loans46,636
28,490
43,611
27,052
Securities borrowed3,567
4,477
3,836
4,448
Other interest-earning assets7,426
5,075
6,751
5,288
FDIC sweeps12,707
2,982
2,758
2,864
$97,575
$84,613
$98,168
$80,935
Average interest-bearing liabilities Customer credit balances $78,625
$68,867
$78,063
$65,716
Securities loaned10,489
5,756
10,891
5,304
Other interest-bearing liabilities-
251
145
313
$89,114
$74,874
$89,099
$71,333
Net interest income Segregated cash and securities, net $(4)
$14
$(4)
$159
Customer margin loans2141
83
386
287
Securities borrowed and loaned, net123
86
434
228
Customer credit balances, net28
8
25
(55)
Other net interest income1/39
10
25
47
Net interest income3 $277
$201
$866
$666
Net interest margin ("NIM")1.13%
0.94%
1.18%
1.10%
Annualized yields Segregated cash and securities-0.04%
0.13%
-0.01%
0.51%
Customer margin loans1.20%
1.16%
1.18%
1.41%
Customer credit balances-0.04%
-0.05%
-0.04%
0.11%
1
Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program. This item is not recorded in the Company's consolidated statements of financial condition. Income derived from program deposits is reported in other net interest income in the table above.2
Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments).3
Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s consolidated statements of comprehensive income. For the three and nine months ended September 30, 2021 and 2020, $2 million, $6 million, $14 million, and $14 million were reported in other fees and services, respectively. For the three and nine months ended September 30, 2021 and 2020, $0 million, $0 million, -$1 million, and $5 million were reported in other income, respectively.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months Nine Months Ended September 30, Ended September 30,2021
2020
2021
2020
(in millions) Adjusted net revenues1 Net revenues - GAAP $464
$548
$2,111
$1,619
Non-GAAP adjustments Currency diversification strategy, net3
(27)
14
6
Mark-to-market on investments2184
(3)
(28)
(3)
Remeasurement of TRA liability3(1)
-
(1)
-
Total non-GAAP adjustments186
(30)
(15)
3
Adjusted net revenues $650
$518
$2,096
$1,622
Adjusted income before income taxes1 Income before income taxes - GAAP $234
$334
$1,414
$864
Non-GAAP adjustments Currency diversification strategy, net3
(27)
14
6
Mark-to-market on investments2184
(3)
(28)
(3)
Remeasurement of TRA liability3(1)
-
(1)
-
Customer compensation expense4-
-
-
103
Bad debt expense5-
-
-
1
Total non-GAAP adjustments186
(30)
(15)
107
Adjusted income before income taxes $420
$304
$1,399
$971
Adjusted pre-tax profit margin65%
59%
67%
60%
Three Months Nine Months Ended September 30, Ended September 30,2021
2020
2021
2020
(in millions) Adjusted net income available for common stockholders1 Net income available for common stockholders - GAAP $42
$46
$241
$124
Non-GAAP adjustments Currency diversification strategy, net1
(5)
3
1
Mark-to-market on investments243
(1)
(6)
(1)
Remeasurement of TRA liability3(1)
-
(1)
-
Customer compensation expense4-
-
-
19
Bad debt expense5-
-
-
0
Income tax effect of above adjustments6(10)
1
1
(4)
Remeasurement of deferred income taxes71
-
1
-
Total non-GAAP adjustments33
(4)
(2)
16
Adjusted net income available for common stockholders $75
$42
$239
$140
Note: Amounts may not add due to rounding. Three Months Nine Months Ended September 30, Ended September 30,2021
2020
2021
2020
(in dollars) Adjusted diluted EPS1 Diluted EPS - GAAP $0.43
$0.58
$2.58
$1.58
Non-GAAP adjustments Currency diversification strategy, net0.01
(0.06)
0.03
0.02
Mark-to-market on investments20.44
(0.01)
(0.06)
(0.01)
Remeasurement of TRA liability3(0.01)
0.00
(0.01)
0.00
Customer compensation expense40.00
0.00
0.00
0.24
Bad debt expense50.00
0.00
0.00
0.00
Income tax effect of above adjustments6(0.10)
0.02
0.01
(0.05)
Remeasurement of deferred income taxes70.01
0.00
0.01
0.00
Total non-GAAP adjustments0.34
(0.05)
(0.02)
0.20
Adjusted diluted EPS $0.78
$0.53
$2.55
$1.79
Diluted weighted average common shares outstanding96,989,968
79,120,548
93,671,689
78,243,699
Note: Amounts may not add due to rounding.Note: The term “GAAP” in the following explanation refers to generally accepted accounting principles in the United States.
1 Adjusted net revenues, adjusted income before income taxes, adjusted net income available for common stockholders and adjusted diluted earnings per share (“EPS”) are non-GAAP financial measures as defined by SEC Regulation G.
We define adjusted net revenues as net revenues adjusted to remove the effect of our GLOBAL currency diversification strategy, our net mark-to-market gains (losses) on investments2, and the remeasurement of our Tax Receivable Agreement (“TRA”) liability3. We define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our GLOBAL currency diversification strategy, our net mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses4, and unusual bad debt expense5. We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects attributable to IBG, Inc. of our GLOBAL currency diversification strategy, our mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses, unusual bad debt expense, and the remeasurement of certain deferred tax assets7.Management believes these non-GAAP items are important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful to investors and analysts in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. Our GLOBAL currency diversification strategy, our mark-to-market on investments, the remeasurement of our TRA liability, customer compensation expenses, unusual bad debt expense, and the remeasurement of certain deferred tax assets are excluded because management does not believe they are indicative of our underlying core business performance. Adjusted net revenues, adjusted income before income taxes, adjusted net income available to common stockholders and adjusted diluted EPS should be considered in addition to, rather than as a substitute for, GAAP net revenues, income before income taxes, net income attributable to common stockholders and diluted EPS.
2 Mark-to-market on investments represents the net mark-to-market gains (losses) on our U.S. government securities portfolio, which are typically held to maturity, investments in equity securities that do not qualify for equity method accounting which are measured at fair value, and certain other investments, including equity securities taken over by the Company from customers related to losses on margin loans.
3 Remeasurement of our TRA liability represents the change in the amount payable to IBG Holdings LLC under the TRA, primarily due to changes in the Company’s effective tax rates. For further information refer to Note 4 – Equity and Earnings per Share under Part II, Item 8 – Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10 K filed with the Securities Exchange Commission (“SEC”) on February 26, 2021.
4 Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses on West Texas Intermediate Crude Oil contracts on April 20, 2020, as previously disclosed.
5 Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the nine months ended September 30, 2020, unusual bad debt expense reflects losses incurred by customers in excess of the equity in their accounts, related to the West Texas Intermediate Crude Oil event, as previously disclosed.
6 The income tax effect is estimated using the corporate income tax rates applicable to the Company.
7 Remeasurement of certain deferred tax assets represents the change in the unamortized balance of deferred tax assets related to the step-up in basis arising from the acquisition of interests in IBG LLC, primarily due to changes in the Company’s effective tax rates. For further information refer to Note 4 – Equity and Earnings per Share under Part II, Item 8 – Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10 K filed with the Securities Exchange Commission (“SEC”) on February 26, 2021.
View source version on businesswire.com: https://www.businesswire.com/news/home/20211019006149/en/